High Court of Singapore: Ma Ong Kee and another v Kaiyo Reptile Products Pte Ltd [2011] SGHC 188

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This case relates to whether Purchasers are liable for Vendor’s GST liability on sale of property.

On 31 March 2010, the parties met and agreed to purchase a non-residential property at a price of S$3.8 million. The option fee was $38,000 ie 1% of the price.

The Option was exercised by the Plaintiffs on 14 April 2010. A cheque was given for $152,000 being the balance of 5%. During that time, the Plaintiffs were not informed that the Defendant was GST registered, and there was no discussion on payment of GST on the purchase price.

By way of the Defendant’s solicitors’ letter dated 15 April 2010, the Plaintiffs were then informed they will have to pay $13,300 being 7% GST payable on the deposit on the purchase price.

On 11 May 2010, the Purchasers’ solicitors wrote to the Vendor’s solicitors to say that the Purchasers were surprised at the belated request for payment of GST and that the Purchasers were not obliged to pay it “as this is contrary to the contractual bargain between the parties. In any event, this is consistent with the position at law where if there is no provision in the Option for the purchaser to pay the vendor’s GST liability or the GST attracted by the sale, then the price quoted by the vendor for the sale of the property shall be deemed to include any GST chargeable on the sale”.

Apparently, the Purchasers offered to complete the sale but to pay the 7% GST amounting to $266,000 to the Purchasers’ solicitors or to a neutral third party to be held as stakeholders pending determination of the GST issue. However, these suggestions were not acceptable to the Vendor. Accordingly, the sale and purchase was not completed on 28 July 2010 which was the scheduled date of completion.

On 30 July 2010, both parties’ lawyers sent each other a 21-day notice to complete the sale and purchase which in turn expired on 20 August 2010.

Counsel for the Purchasers submitted that since the price quoted by the Vendor was $3.8 million, that was inclusive of GST and they should not be liable for GST on the $3.8 million.

The issue here is on the correct interpretation of condition 7.3.1 of the 1999 Conditions of Sale, ie, whether it imposed liability for GST on the Purchasers.

The Court made the declarations sought by the Vendor. It was held that:

  • Condition 7.3.1 although was not well drafted incorporates two points, ie, firstly, to stipulate that the purchaser is to pay GST and, secondly, to pay it on completion or earlier.

Condition 7.3 of the 1999 Conditions of Sale states:

“7.3.1 The Purchaser (whether of freehold or leasehold property) shall pay all Goods and Services Tax, if any, which may be payable in respect of the sale price of the property under the Goods and Services Tax Act (Cap. 117A) on completion or earlier as required by the Comptroller.

7.3.2 These provisions are not to merge in the Conveyance of the property.”

  • Regulation 77(1) of the Goods and Services Tax (General) Regulations does not preclude the supplier from recovering the GST on the purchase price (for which it was liable) from the consumer.

Regulation 77(1) of the Goods and Services Tax (General) Regulations states:

77.–(1) Where any taxable person displays, advertises, publishes or quotes in any manner the price of any supply of goods or services he makes or intends to make, such price shall include the tax that is chargeable on the supply under the Act unless the Comptroller approves otherwise under Regulation 78.

  • Section 8(3) of the Act stipulates that tax on any supply of goods or services is a liability of the person making the supply. However, this only made the supplier liable to the relevant authority for GST.
  • However, the Vendor’s claim for damages for not utilising the Deposit was not allowed as the facts in support of that claim were not pleaded. There was also no elaboration as to whether the Vendor’s solicitors had earned any interest on the Deposit and whether it would pass the benefit of the interest to the Vendor. In any event, the Vendor has benefitted from the forfeiture of the Deposit and from the rise in value of the Property since the date of the expiry of the 21-day notices.

The decision was made on 16 August 2011.